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Navistar (NAV) to Shut Illinois Facility, Explore New Products

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Navistar International Corporation (NAV - Free Report) recently announced the decision to shut and sell its Melrose Park facility in Illinois to an industrial park developer that has an actionable plan to redevelop the parcel into a modern industrial business park.

The Melrose Park campus is located about 16 miles from the company headquarters in the Chicago suburb of Lisle. The facility previously manufactured Navistar’s now discontinued 9- and 10-liter N-Series engines, but has served mostly as a testing facility and technical center since 2017.

The company expects to terminate operations at the Melrose Park campus by November this year, and complete the sale and divestiture of the property by the end of 2021.

Per the U.S.-based truck maker, half of the facility's current workforce will be transferred to other facilities, while the other half will be laid off.

On account of the sale, the company will incur a pre-tax charge of roughly $85 million, including approximately $40 million of cash-related charges.

Previously in 2018, Navistar had terminated 170 employees in Melrose Park when it curbed manufacturing engines in the unit. Amid the trucking industry’s transition to alternative fuel drivetrains, the company’s need for engine testing reduced as it downsized engine manufacturing.

Per Navistar, it no longer seemed logical to maintain a facility of this size and magnitude, given the transformations at the company and in the trucking industry. Moreover, the investment in the Melrose Park was diverting crucial resources needed for investments in new technologies and products.

For Navistar, the most difficult part of the decision was to layoff dedicated and committed colleagues at a property that has been integral to its history. While it was a challenging decision, it was in its best interest and was imperative to be taken in order to position the company robustly for future.

Navistar anticipates that the site's comprehensive redevelopment will more than double property tax revenues for local governments from the current levels, and that the redeveloped site will create more local jobs than the company’s present operations generate. Thus, the decision would help unlock enhanced economic growth for the Melrose Park community.

Other Updates

Recently, Navistar recalled almost 20,000 heavy-duty trucks in the United States and Canada the engine revving of which, while using a power take-off accessory, might overcome the vehicle’s parking brake resulting in an accident.

This was the second time the company has recalled its work trucks for this parking brake issue — in December 2019, Navistar had recalled 12,359 vehicles.

Last August, Navistar inked a long-term supply agreement with Cummins (CMI - Free Report) , which will supply the former with medium- and heavy-duty truck, and bus engines through the next two emission cycles, or 2026.

Further, as part of a definitive deal worth $3.7 billion reached last November, Navistar will soon become part of TRATON Group, the commercial truck holding company of Germany’s Volkswagen AG (VWAGY - Free Report) .

Navistar, peers of which include Magna International (MGA - Free Report) and BRP Inc., currently carries a Zacks Rank of 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Notably, shares of the company have appreciated 62.9% over the past year compared with its industry’s rally of 19%.

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